According to the Pennsylvania website, military pay of residents earned both inside and outside Pennsylvania is subject to PA income tax dependent upon whether it is inactive duty or active duty.
If you are a resident of Pennsylvania, and earned the income while stationed in Pennsylvania, the active duty military pay is taxable to Pennsylvania. If you were stationed outside of Pennsylvania, the active duty military pay is not taxable to PA. Any other military pay (not for active duty) may be taxable to the state.
To enter the subtraction for the military pay, follow these steps in the program:
- State Section
- Pennsylvania Return
- Edit
- Adjustments to Income
- Military Pay Adjustment
- Enter the amount as a negative number
If you are a nonresident of Pennsylvania stationed in Pennsylvania, your active duty military pay is not taxable to Pennsylvania.
If Pennsylvania tax was withheld from the active duty military pay, follow these steps in the program:
- State Section
- Pennsylvania Nonresident Return
- Edit
- Adjustments to Income
- Military Pay Adjustment
- Enter the amount as a negative number
If one spouse is a resident and the other is not, file married filing separate returns. However, you can file a joint resident return if you qualify and wish to both be treated as Pennsylvania residents.
Are my military pensions taxable?
Military retirement pensions are not taxable for PA-PIT income purposes.
Use the School District Code for the domicile of your spouse (if living in PA), your parents (if entered military while domiciled in PA) or your residence while on active duty stationed in PA (if PA resident).